Stock aerial Dubai skyline
It is proving an exceptionally difficult year in managing relations between homeowners and property management companies. Serving legal notices will only raise the heat further. Image Credit: AFP

Dubai: Legal notices are to be issued to homeowners in Dubai who have not paid their service charges for the first six months, property management companies confirm. They have received the regulator’s approval to send the notices after service charge collections drop off by 50-60 per cent in the first six months.

Any more delay in getting fee collections up to date will create problems in the quality of upkeep, sources add. If homeowners keep delaying payments, “Penalties will also start accruing,” said the CEO at one of the leading owners association management companies in the UAE.

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As per the legal notice, homeowners will be given 15 days to clear off their dues. Property management companies have to get clearance from RERA (Real Estate Regulatory Authority) before issuing notices.

Once the notices are issued, property owners will have limited leeway in trying to delay payments. The only option them would be to escalate the issue directly with the authorities and pursue other legal options.

Tug of war

Service charges disputes have escalated in recent months, more so after the pandemic struck and created a situation where property owners have seen declines in their personal incomes. Or successive yearly rental declines are getting owners to demand similar declines on service charges.

That’s not the way property management firms see it – “Non-payment of service fees have accumulated and leading to a deterioration in the property’s upkeep,” the OA company head added.

“Despite rents having gone down, the OA companies have nothing to do with the rental market forces. It’s not as if service fees increase as rents increase either.”

Drop the charges

On their part, homeowners and their representatives have in recent weeks trying to get RERA to look into their concerns over service charges. “We have asked RERA to order a “forensic” audit into the setting of service charge rates and how the funds collected have been used in recent years,” said the owner of a unit at a high-rise in JVC (Jumeirah Village Circle).

“Our rates are now more than Dh20 a square foot – which is more than what they are at prime locations in Dubai. But the state of the property has gotten worse – we cannot keep on paying and then not have any accountability for the OA company or the developer.”

The greater the drop in service fee collections, the only way to keep asset quality is either raise the fees or to dip into the "sinking fund", both of which is counter-productive

- CEO of a property management company in Dubai

A difficult exercise

OA company sources say that trying to reduce rates and then expect service levels to stay as they are – or even improve – is not feasible. One option would be to try and reduce the utility charges, which represent 30-50 per cent of the service fees.

If that doesn’t happen, “The only way to reduce costs will be to rationalize the workforce at OA companies,” said the CEO at a mid-sized property management company. “The challenge here will be to not compromise on the value of the asset.

“In the final analysis, reducing costs will take some time and the transition will be painful for all the players involved.”

Want things to change now

But property owners are in no mood to wait and for the rates to stabilize/drop with time. They want intervention from RERA and for its assigned audit committees to revise charges for 2020 and beyond immediately.

Homeowners say they should be given greater say in confirming OA management companies, and that this should be done through proper bidding process. What they don’t want to see are OA companies that have close affiliations with developers.

“Moves to reduce costs by OA companies have thus far not really amounted to much,” said a property investor. “So there is a sense of anxiety as to what the next steps will be in terms of increasing collections (via legal recourse) as well as get some relief from utility providers.”